How can I use my VA 0 down loan to invest in a multifamily home?

12 Replies

Hi, BP community! I am new to real estate investing and currently searching my area to make my first purchase on a duplex that I plan to owner occupy and rent out the other side. I'm stationed in Anchorage Alaska and cost of living and real estate is really expensive up here. Does anybody have any suggestions or insight as to how I can use my VA 0 down loan to benefit me in my first home purchase and create some cash flow?

Cash flow while you live there is almost certainly not going to happen, @Jeromy Jordan . It is also very unlikely once you move out. In expensive areas duplexes are difficult to cash flow as pure investment properties. Given that you will be 100% leveraged (actually 100%+ when you factor in the funding fee), it's simply not going to be in the cards. The duplexes I saw on Redfin don't look they'll come close to the 1% rule. You can certainly look into 3- and 4-unit properties, which are more likely to perform.

Now that doesn't mean you shouldn't do a MFR house hack. If you're able to lower your living expenses, build equity, and gain land lording experience, that's a win!

Feel free to share numbers. If you want to go through the analysis, I'm happy to take a look.

@Jeromy Jordan - Jaysen is right in saying duplexes will rarely perform as well as a triplex or fourplex. That said - most duplex purchasers go for them due to a higher quality of life/living. It's more of a house hack than a cash flow perspective. I just listed a renovated duplex in Eagle River for 330k - one side is a 1/1 with $950-1000 month projected rents the other is a 3/2 - with $1600 projected rent. For someone to live in the smaller side - that $1600 will cover most of a mortgage - so if you receive a BAH then you're cash flow is in that. But you can find a fourplex in Anchorage for ~550k in good areas that will do gross rents of 5,000+ (so $3750 when owner occupying a unit) - now you should have positive cash flow from the property to you.

Due to me not having any landlord experience, I didn't want to bite off more than I can chew by getting more than a duplex. Would you consider it a good deal if I could at least live for free by having the tenant's rent cover the mortgage? My plan was to live in it for 2 years, then rent out the other side when I PCS. Then possibly use whatever equity I have in that time (which probably wouldn't be much) to help for a down payment on another duplex at my next duty station.

@Jamie Rose in your experience, do you think it would be overwhelming for a new real estate investor to go straight into a triplex or fourplex as a first time investor new to land-lording?  Another one of my fears is that I cant get the units rented out and I'm stuck with the full mortgage.  I haven't dived deep enough in the rental market yet around the area.  Also, I am going to check out the listing you mentioned.  We preferred to stay in the eagle river area but the homes out there seem more expensive than anchorage. 

@Jaysen Medhurst Thanks for the advice. Should I be keeping my lender in the loop that I am now looking for a duplex instead of a SFR/town-home? I've already been pre-approved for an amount that would cover the cost of a duplex. I just don't want any surprises of what I can and cant do on my end or the lenders end when I finally find a good deal on a property.


@Jeromy Jordan the answer in your subject line question has a simple answer. Get a good agent who actively invests in real estate and they can consult you along the way and answer all your questions. They'll also never leave you after the sale. I work down the hall from @Jamie Rose and can vouch that he's one of the best in our area. 

@Keenan Fitzpatrick great advice, thanks!  I have been talking to a couple real estate agents about my plans and they are helping me try to find properties in the area, but I don't think none of them have a investing background.  I will reach out to Jamie and pick his brain. Thanks.

Originally posted by @Jeromy Jordan :

@Keenan Fitzpatrick great advice, thanks!  I have been talking to a couple real estate agents about my plans and they are helping me try to find properties in the area, but I don't think none of them have a investing background.  I will reach out to Jamie and pick his brain. Thanks.

Dude. Stop right now and call him. This is something that has to be a "no" if it's not a "hell yes". The difference is night and day and, as a beginner investor, you don't know what you don't know. I bought my first place from an agent who had some investments but wasn't what I would consider a great investor agent. If you spend 10 min on the phone with a guy like me or Jamie, it'll be apparent. You're gonna be so happy that your next kid is gonna be Jamie Keenan Jordan. LOL

 

@Jeromy Jordan

Out of all loans out there, VA Loans have the most expensive fees. With zero down payment means it's hard to cash flow on anything you buy, unless you find a 3 family that doesn't look too good but you can make it look pretty and add value to it (only if the numbers work will it cash flow a little)

@Jeromy Jordan happy to talk to you if you want to give me a shout. I’m active duty military, bought a 4plex up here as my first investment. Working a fixer upper in eagle river now. Lots of lessons learned I can pass on. Wife and I are a realtor/invested duo so I can speak to the whole range of thought. Send me a PM if you want to chat! 

Yeah, keep your lender in the loop, @Jeromy Jordan . See if you would get qualified for more on a MFR. Many lenders will consider 75% of current rents. This is lender specific, so best to have the conversation now.

Also, don't be intimidated by a fourplex vs. duplex. It's two more tenants to manage, NBD.